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- The United States Federal Reserve has announced that it would cut the interest rates for the first time since a decade.
- Fed Chairman cited global weakness, simmering trade tensions and a desire to boost too-low inflation as the reasons for the central bank’s decision to cut the interest rates.
- This rate reduction was the first since December 2008 crisis when the Fed dropped its interest rates effectively to zero as it battled recession and financial crisis.It began raising interest rates in December,2015.
- Further,this move was seen as a precautionary effort to protect the United States from slowing growth in China and Europe and uncertainty over US President trade war.
- The fed rate cut cycle also means a weaker dollar which is good for the US but may not be so for the rest of the world.
- It has been seen in the past that as the dollar weakens due to lower growth tendencies,the rupee has strengthened which has impacted exports.This will also impact the current account deficit(CAD).
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